Bitcoin (BTC) had a very volatile week, as the price of Bitcoin jumped from $ 32,000 to $ 38,500 and returned to $ 33,000 in 24 hours.
The initial raise to $ 38,500 came just minutes after Elon Musk added #Bitcoin to his Twitter profile.
However, no monitoring of this price movement was seen on the charts, as Bitcoin fell substantially in the following hours. The $ 34,500 area is currently a significant resistance zone to break through if the market wants to sustain bullish momentum.
Failure to break $ 38,000 causing a crash
The levels that are essential to watch are highlighted in the chart above. Simply put, $ 38,000 must break for the bull to continue. Reversing this level of support opens the door to new highs.
However, the increase could not be sustained yesterday. After the $ 38,000 level failed, the $ 34,000 level could not provide the highly necessary support for an additional boost.
Therefore, the “Elon Musk bomb” can be considered an outlier, and the general trend continues. This is a downward trend since the maximum peak of $ 42,000, which is likely to continue unless Bitcoin’s price can break through $ 34,500 and turn it into support.
Dollar showing strength is bad news for Bitcoin
One of the main arguments for Bitcoin’s further disadvantages would be the recovery of the US Dollar Currency Index (DXY). This index shows a potential bottom formation, as a bullish divergence is seen at the significant level of 90 points.
After that, the bullish divergence will be confirmed by a higher bearish, indicating that a higher bullish is likely.
Notably, the previous recovery of the DXY index in September caused a 20% correction for Bitcoin. However, since the recovery in relief, the DXY Index has shown massive weakness, one of the significant variables for the huge rise in Bitcoin’s price to $ 42,000.
However, February is not the best month for stocks. The same can be concluded about Bitcoin, since February 2018 was when Bitcoin fell to $ 6,000 after reaching its previous record.
Therefore, a recovery from DXY could add to the bearish sentiment for Bitcoin in February as well.
Bitcoin dominance index eye relief rally
Historical charts show the market’s past behavior with many patterns being cyclical.
When the Bitcoin dominance peaked in December, massive spikes were seen across the altcoin market. However, after such a huge spike, a healthy correction would not be a surprise to test previous resistance levels.
These tests would mean a leap into Bitcoin’s dominance in February, which could open the door to a major race for the entire crypto market from March onwards.
Critical levels for observing Bitcoin
The critical levels to watch are easy to see in the chart above. First, the Bitcoin price is expected to rebound to the $ 34,500 level as support to sustain bullish momentum. If that happens, the $ 38,000 level will be tested again. This test is likely to result in a break above $ 38,000 towards the all-time high.
However, if the price of Bitcoin does not reach $ 34,500, there is likely to be an additional downward momentum, as the graph shows. In this perspective, the critical level to be observed is the $ 30,000 region. If that doesn’t support support (after several tests), I expect a drop to $ 25,000 and the 21-week MA.
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